A big Wall Street business is in danger of drying up

In the past two years, American companies have spent nearly $4 trillion on takeovers, fueled in large part by the unprecedented opportunity to borrow at extremely low interest rates.

For investment banks, this has been a fee bonanza. They get paid handsomely for advising buyers and sellers, and helping arrange the financing.

That's all starting to change. Investors are starting to anticipate the Federal Reserve will lift interest rates from zero and worry about an economic slowdown and what that means for borrowers.

The net effect: bond prices (especially for risky high-yield debt) are tumbling, and that's driving the cost of new borrowings higher fast.

It's been a "dramatic" move in a very short period of time, said Howard Marks, the co-founder of debt investor Oaktree Capital Partners. "The buyers are gone."

"We have bonds that have gone from 90 to 60 in the last couple months, not only in the energy sector," he said Tuesday December 8 at the Goldman Sachs Financial Services Conference in New York.

So what's all this mean for M&A?

To understand how this translates to the M&A market, consider Dell's $67 billion acquisition of EMC Corp. The Wall Street Journal's Matt Wirz and Liz Hoffman reported this month that Dell could have to pay as much as 12% on loans to fund the takeover - twice the recent going rate. That would add hundreds of millions of dollars to the interest bill affiliated with the deal, the Journal reported.

Dell founder Michael Dell Slaven Vlasic/Getty Images It's happening because banks are trying to ensure they can find buyers for the debt.

"The credit market is under a lot of pressure; banks are going to be a lot more cautious,"one senior M&A banker told Business Insider, speaking on the condition of anonymity. "Prices are substantially higher than they were a year ago,"

Baker Mackenzie LLP, the law firm, predicts completed M&A volume in 2016 will rise to about $3 trillion, from an expected $2.7 trillion in 2015.

But if debt investors overreact to the Fed then that total could fall by $800 billion - or about a one third drop that would be "primarily the result of increasing cost of capital making some transactions more difficult to execute."

Currently, the law firm is putting only a 10% probability on that happening.

Not everyone's going to be bothered by rising rates. Some large acquirers - like big tech companies - are loaded and don't need to worry about borrowing costs, for example.